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Global: FCA and PSR Unveil Next Steps to Advance Open Banking in the UK

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FCA and PSR Unveil Next Steps to Advance Open Banking in the UK
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The Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) have outlined plans to enhance open banking in the UK, including the establishment of an independent entity to oversee variable recurring payments (VRPs). Described as a “UK success story,” open banking now boasts over 11.7 million active users, with more than 22.1 million open banking transactions processed monthly.

Driving Innovation with Variable Recurring Payments

VRPs represent the next phase in the evolution of open banking, offering consumers greater control over their recurring expenses. This payment method allows users to set specific limits on amounts payable either per transaction or over a defined period, reducing the risk of unexpected charges.

For businesses, VRPs promise to cut costs by providing a cost-effective alternative to traditional card payment processing fees. These benefits are expected to support wider adoption in sectors such as e-commerce, utility payments, government services, and financial institutions.

Open Banking Limited has been entrusted with the critical task of establishing an independent central operator to coordinate VRPs, ensuring a streamlined and efficient system. As the service comes online, it is anticipated to transform how recurring payments are made, enhancing convenience and transparency for users.

Collaborative Efforts for Open Banking Expansion

The FCA emphasized its commitment to working with industry stakeholders and trade associations to advance the commercial frameworks underpinning VRPs and open banking’s broader use in e-commerce. This collaboration aims to create a robust ecosystem that facilitates seamless and secure transactions.

The Path Toward Open Finance

While VRPs are a pivotal milestone, the FCA highlighted the broader vision of extending open banking to other business areas under the umbrella of open finance. SME lending has been identified as a potential priority, signaling new opportunities for innovation and financial inclusion.

“The development of open finance represents the natural evolution of open banking, offering even greater opportunities to enhance financial services,” the FCA stated.

Conclusion

The FCA and PSR’s strategic roadmap for open banking reinforces the UK’s position as a leader in financial innovation. By prioritizing consumer protection, cost efficiency, and collaboration, these regulators aim to ensure open banking’s continued success while laying the groundwork for open finance to unlock new possibilities for businesses and consumers alike.

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